The American company’s chief executive Fabrizio Freda expressed his excitement over the opportunity in China’s luxury beauty market during the firm’s latest earnings conference.
“We also believe that there is a particularly strong opportunity in the luxury area, around our luxury brands, which as I said are doing very well.”
He highlighted the strong performance of its prestige brands on Douyin during the Double Eleven Mega Shopping Festival, which helped to offset the decline on Tmall.
“For online, while the channel was especially pressured by softness in overall prestige beauty and the 11.11 Global Shopping Festival, our brands performed strongly on Douyin, rising triple digit organically to partially offset lower sales for the event. The Estée Lauder brand ranked number one in prestige beauty on Douyin, having also ranked number one for store live streaming.”
To capitalise on the opportunities in China’s luxury market, the company will leverage on some of its most iconic brands.
“La Mer, Tom Ford, Le Labo, Bobbi Brown have extraordinary aggressive plans,” Freda declared.
He added that the firm will showcase more innovations in the latter half of the year from its local laboratory in Shanghai.
Its facility in Shanghai will be even more important in the future with the progress of domestic Chinese brands.
“We completely acknowledge there will be a continuous development of local brands, and the strength of our innovation and the differentiation of our brands is going to be key, and so we’ll continue to invest in this differentiation and in the strengths. The investment in our local lab, that will develop a lot of local innovation, is part of the answer to how to compete in this evolving environment as well,” said Freda.
A bumpy period
Freda’s remarks follow what has been a tricky quarter for the company.
In the quarter ending December 2023, organic net sales fell 8%.
This was attributed to challenges in the Asia travel retail market as well as the sluggishness of prestige beauty in China.
In addition to the mixed performance during the Double Eleven sales, the company’s skin care sales fell in China.
However, this was partially offset by strong growth in the fragrance business, driven by double-digit growth from Jo Malone London and TOM FORD.
Additionally, the launch of Le Labo in the fourth quarter of fiscal 2023 helped boost fragrance sales.
The company also saw growth in hair care thanks to the continued strength of Aveda.
Freda expressed his confidence in the company’s future in China.
“Impressively, we entered the third quarter in Mainland China with momentum in brick-and-mortar having expanded our prestige beauty share offline in the second quarter driven by strong double-digit retail sales growth in each of department stores, specialty multi- and free-standing stores.”
Freda concluded: “We have a strong business in China, we have strong market share, and we are determined to continue to invest for the long term in China.”
